As Washington Dithers on Debt, China Calls for ‘De-Americanized’ World

Federal workers demonstrate for an end to the U.S. government shutdown on the west front of the U.S. Capitol in Washington.

The fiscal impasse in Washington has rattled markets around the world. As the deadline approaches for a deal that could avert a devastating U.S. government default, there is mounting unease.

But now the markets have something even more unpalatable to reflect on—more worrisome than a speeding ratings downgrade and more powerful than a government sequester: a Xinhua commentary has called for a “de-Amercanized world.”

No, China’s official news agency wasn’t suggesting a halt to all cooperation in future “Iron Man“ movies or a campaign to take those gold iPhones off Chinese shelves. Nor was it suggesting a boycott of the Harvard Business School for the children of top Communist Party officials – or just the brainier and more ambitious of the nation’s students.

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The political antics in Washington, which have dragged on despite last-minute efforts to reach a compromise bridging the ideological divide between warring Democrats and Republicans, mean it’s time for something to replace “Pax-Americana,” according to Xinhua.

“Emerging from the bloodshed of the Second World War as the world’s most powerful nation, the United States has since then been trying to build a global empire by imposing a postwar world order, fueling recovery in Europe, and encouraging regime-change in nations that it deems hardly Washington-friendly,” Xinhua said in a commentary that traced a mighty sweep over post-war history.

“Instead of honoring its duties as a responsible leading power, a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies,” Xinhua said in a signed commentary on its English-language news service.

“As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites, while bombings and killings have become virtually daily routines in Iraq years after Washington claimed it has liberated its people from tyrannical rule.”

Stripping out the hyperbole, there may be a lot of sympathy for a little bit of that.

China is on fairly firm ground when it talks about its pocket book. Beijing’s concerns over the fate of its U.S. investments are much like the worries of other holders of U.S. assets. They don’t like to see money needlessly thrown away. And they don’t like what they see as a cavalier attitude among some elected officials in Washington to the responsibilities of a nation that provides the world’s reserve currency.

China had $3.66 trillion in foreign-exchange reserves as of the end of September—a big chunk of which was in U.S. dollar—and it has a lot to be worried about if the political gridlock in Washington blocks a temporary solution on the U.S. debt ceiling and government payments aren’t made. A drop in the value of the dollar—or in U.S. Treasurys, which make up much of Beijing’s dollar holdings—would mean a nasty hit for China, as well as other investors.

The official news agency turned to one of China’s policy objectives—a less dominant role for the dollar in the global reserve-currency system—while avoiding mention of the flip side of that policy, a greater part for the yuan.

“What may also be included as a key part of an effective reform is the introduction of a new international reserve currency that is to be created to replace the dominant U.S. dollar, so that the international community could permanently stay away from the spillover of the intensifying domestic political turmoil in the United States,” Xinhua said.

“The developing and emerging-market economies need to have more say in major international financial institutions including the World Bank and the International Monetary Fund, so that they could better reflect the transformations of the global economic and political landscape.”

And finally, Xinhua tipped its hat to reality, saying it didn’t really want to “completely toss the United States aside.” Xinhua added not too reassuringly that (alas) this would be impossible.

Instead, it really just wanted to encourage Washington to play a much more constructive role in addressing global affairs.

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